Michael Kors Q1 Tops Forecasts, But Outlook Weighs On Stock

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Luxury-goods maker Michael Kors Holdings Ltd. posted better-than-expected Q1 results, but investors may have been put off by the company’s outlook for the second quarter and the remainder of the fiscal year. The firm’s shares took a tumble in early-morning trading on Wednesday, but as of 11:15 a.m. ET, they had returned to a modest gain of 0.06 percent.

The company said its Q1 net income slipped 16 percent year over year, to $147.1 million, or 83 cents per diluted share, from $174.4 million, or 87 cents per diluted share, in the year-ago same period. Adjusted diluted earnings per share were 88 cents, topping forecasts for Q1 diluted EPS of 74 cents.

Total revenue increased 0.2 percent, to $987.9 million, from $986 million in the first quarter of the prior year, blowing past analysts’ estimates for revenues of $953 million. On a constant-currency basis, total revenue was flat versus the prior fiscal year.

Michael Kors Chairman and CEO John Idol said he was pleased with the company’s Q1 results, but he remained cautious about ongoing mall-traffic declines and softening tourism.

We delivered another quarter of strong growth in our North American digital flagships, further expanded our presence globally, particularly in Asia, and expanded our fashion-product offerings,” Idol said in a release. “However, this progress was muted by the continued decline in mall-traffic trends, as well as a decrease in tourism in certain major cities, which negatively impacted our comparable-sales performance during the quarter.”

Comparable-store sales in the firm’s retail segment fell 7.4 percent due to a high-single-digit comp slide in North America and a low-double-digit decline in Europe, Idol noted during the brand’s conference call.

For its outlook, the company predicted Q2 EPS in the range of 84 cents to 88 cents — well below Wall Street’s consensus of $1.03. Revenues are expected to be in the range of $1.07 billion and $1.09 billion.

For the full year, the firm downward-adjusted its comp-sales guidance and expects a decline in the mid-single-digit range, versus prior guidance in the low-single-digit range. GAAP EPS is now expected to be $4.51 to $4.59, compared with prior guidance of $4.47 to $4.55. Adjusted EPS remains unchanged at $4.56 to $4.64.

The Michael Kors brand remains strong, and we have multiple long-term growth opportunities across our product categories and regions,” Idol said. “… In footwear, novelty details and new materials will play a big role in our fall offerings, with pearls, jewel embellishments, velvet and flannel featured prominently in the collection.”

The CEO noted that the brand will expand its rainboot offering, with updates such as tweed and quilting, and is introducing two new sneaker styles.